ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Unless otherwise indicated, all dollar amounts are presented in thousands except per share data.
Forward Looking Statements
This
report includes certain statements that are forward looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of
the Securities Exchange Act of 1934, as amended. These forward looking statements are made based on managements current expectations and beliefs regarding future and anticipated developments and their effects upon Thor, and inherently involve
uncertainties and risks. These forward looking statements are not a guarantee of future performance. We cannot assure you that actual results will not differ from our expectations. Factors which could cause materially different results include,
among others, raw material and commodity price fluctuations, raw material or chassis supply restrictions, the level of warranty claims incurred, legislative, regulatory and tax policy developments, the impact of rising interest rates on our
operating results, the costs of compliance with increased governmental regulation, legal and compliance issues including those that may arise in conjunction with recent transactions, the potential impact of increased tax burdens on our dealers and
retail consumers, lower consumer confidence and the level of discretionary consumer spending, interest rate fluctuations and the potential impact of rising interest rates on the general economy, restrictive lending practices, management changes, the
success of new product introductions, the pace of obtaining and producing at new production facilities, the pace of acquisitions, the potential loss of existing customers of acquisitions, the integration of new acquisitions, our ability to retain
key management personnel of acquired companies, the loss or reduction of sales to key dealers, the availability of delivery personnel, asset impairment charges, cost structure changes, competition, the impact of potential losses under repurchase
agreements, the potential impact of the strengthening U.S. dollar on international demand, general economic, market and political conditions and the other risks and uncertainties discussed more fully in ITEM 1A of our Annual Report on Form
10-K
for the year ended July 31, 2016.
We disclaim any obligation or undertaking to disseminate
any updates or revisions to any forward looking statements contained in this report or to reflect any change in our expectations after the date hereof or any change in events, conditions or circumstances on which any statement is based, except as
required by law.
Executive Overview
We were founded in 1980 and have grown to be one of the largest manufacturers of RVs in North America. According to Statistical Surveys, Inc. (Stat Surveys), for the calendar quarter ended
March 31, 2017, Thors combined U.S. and Canadian market share, including Jayco, was approximately 49.8% for travel trailers and fifth wheels and approximately 41.8% for motorhomes.
Our business model includes decentralized operating units, and we compensate operating management with a combination of cash and restricted stock
units, based primarily upon the profitability of the business unit which they manage. Our corporate staff provides financial management, insurance, legal, human resource, risk management and internal audit functions to our operating units. Senior
corporate management interacts regularly with operating management to assure that corporate objectives are understood and are monitored appropriately.
Our RV products are sold to independent,
non-franchise
dealers who, in turn, retail those products. We generally do not finance dealers directly, but do provide
industry-customary repurchase agreements to certain of the dealers floor plan lenders.
Our growth has been achieved both
organically and by acquisition. Our strategy is designed to increase our profitability by driving innovation, servicing our customers, manufacturing quality products, improving the efficiencies of our facilities and making acquisitions.
We have historically relied on internally generated cash flows from operations to finance substantially all of our growth, however, we obtained an
asset-based revolving credit facility to partially fund the fiscal 2016 acquisition of Jayco as discussed in Notes 2 and 11 to the Condensed Consolidated Financial Statements. Capital expenditures of $79,456 for the nine months ended April 30,
2017 were made primarily for land and production building additions and improvements, as well as for replacing machinery and equipment used in the ordinary course of business.
14
Recent Events
On June 30, 2016, the Company closed on a Stock Purchase Agreement (Jayco SPA) for the acquisition of all the issued and outstanding capital stock of towable and motorized recreational vehicle
manufacturer Jayco, Corp. (Jayco) for total cash consideration of $581,099. This acquisition was funded from the Companys cash on hand and $360,000 from an asset-based revolving credit facility as more fully described in Notes 2
and 11 to the Condensed Consolidated Financial Statements. Jayco operates as an independent operation in the same manner as the Companys other recreational vehicle subsidiaries. The Company purchased Jayco to complement its existing towable
and motorized RV product offerings and dealer base.
Industry Outlook
The Company monitors the industry conditions in the RV market through the use of monthly wholesale shipment data as reported by the Recreation
Vehicle Industry Association (RVIA), which is typically issued on a
one-month
lag and represents manufacturers RV production and delivery to dealers. In addition, we also monitor monthly
retail sales trends as reported by Stat Surveys, whose data is typically issued on a
month-and-a-half
lag. The Company believes
that monthly RV retail sales data is important as consumer purchases impact future dealer orders and ultimately our production.
RV
dealer inventory of Thor products as of April 30, 2017 increased 54.8% to approximately 127,100 units from approximately 82,100 units as of April 30, 2016. The acquisition of Jayco accounted for 37,800 of the 45,000 unit increase and 46.0%
of the 54.8% percentage increase with an organic increase of 8.8% in correlation with current retail demand. We believe our dealer inventory levels are appropriate for seasonal consumer demand.
Thors RV backlog as of April 30, 2017 increased $1,303,313, or 123.3%, to $2,360,124 from $1,056,811 as of April 30, 2016, with
Jaycos backlog accounting for $569,102 and 53.9% of these increases, respectively.
Industry Wholesale Statistics
Key wholesale statistics for the RV industry, as reported by RVIA for the periods indicated, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. and Canada Wholesale Unit
Shipments
|
|
|
|
Calendar Quarter Ended March 31,
|
|
|
|
|
|
%
|
|
|
|
2017
|
|
|
2016
|
|
|
Increase
|
|
|
Change
|
|
Towable Units
|
|
|
104,519
|
|
|
|
94,154
|
|
|
|
10,365
|
|
|
|
11.0
|
|
Motorized Units
|
|
|
16,347
|
|
|
|
14,041
|
|
|
|
2,306
|
|
|
|
16.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
120,866
|
|
|
|
108,195
|
|
|
|
12,671
|
|
|
|
11.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RVIA releases calendar year unit shipment forecasts periodically throughout the calendar year, updating their prior
forecast by factoring actual year-to-date wholesale and retail unit shipments and current economic indicators into their new forecast. We expect the next RVIA forecast will be published in June 2017 and will take into consideration current wholesale
and retail shipment data.
Industry Retail Statistics
We believe that retail demand is the key to continued growth in the RV industry, and that annual RV industry wholesale shipments will generally be in line with annual retail sales going forward.
Key retail statistics for the RV industry, as reported by Stat Surveys for the periods indicated, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. and Canada Retail Unit
Registrations
|
|
|
|
Calendar Quarter Ended March 31,
|
|
|
|
|
|
%
|
|
|
|
2017
|
|
|
2016
|
|
|
Increase
|
|
|
Change
|
|
Towable Units
|
|
|
71,966
|
|
|
|
64,953
|
|
|
|
7,013
|
|
|
|
10.8
|
|
Motorized Units
|
|
|
11,463
|
|
|
|
10,174
|
|
|
|
1,289
|
|
|
|
12.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
83,429
|
|
|
|
75,127
|
|
|
|
8,302
|
|
|
|
11.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: Data reported by Stat Surveys is based
on official state records. This information is subject to adjustment and is continuously updated.
|
|
15
Company Wholesale Statistics
The Companys wholesale RV shipments, for the calendar quarters ended March 31, 2017 and 2016 to correspond to the industry periods denoted above, were as follows (includes Jayco results only from the
June 30, 2016 date of acquisition forward):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. and Canada Wholesale Unit
Shipments
|
|
|
|
Calendar Quarter Ended March 31,
|
|
|
|
|
|
%
|
|
|
|
2017
|
|
|
2016
|
|
|
Increase
|
|
|
Change
|
|
Towable Units
|
|
|
54,733
|
|
|
|
33,150
|
|
|
|
21,583
|
|
|
|
65.1
|
|
Motorized Units
|
|
|
7,189
|
|
|
|
3,878
|
|
|
|
3,311
|
|
|
|
85.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
61,922
|
|
|
|
37,028
|
|
|
|
24,894
|
|
|
|
67.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company Retail Statistics
Retail statistics of the Companys RV products, as reported by Stat Surveys, for the calendar quarters ended March 31, 2017 and 2016 to correspond to the industry periods denoted above (and adjusted to
include Jaycos results only from the June 30, 2016 date of acquisition forward), were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. and Canada Retail Unit
Registrations
|
|
|
|
Calendar Quarter Ended March 31,
|
|
|
|
|
|
%
|
|
|
|
2017
|
|
|
2016
|
|
|
Increase
|
|
|
Change
|
|
Towable Units
|
|
|
35,078
|
|
|
|
22,197
|
|
|
|
12,881
|
|
|
|
58.0
|
|
Motorized Units
|
|
|
4,793
|
|
|
|
2,810
|
|
|
|
1,983
|
|
|
|
70.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
39,871
|
|
|
|
25,007
|
|
|
|
14,864
|
|
|
|
59.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our outlook for future growth in retail sales is dependent upon various economic conditions faced by consumers such
as the rate of unemployment, the level of consumer confidence, the growth in disposable income of consumers, changes in interest rates, credit availability, the pace of recovery in the housing market and changes in tax rates and fuel prices. With
continued stability or improvement in consumer confidence, availability of retail and wholesale credit, low interest rates and the absence of negative economic factors, we would expect to see continued growth in the RV industry.
A positive future outlook for the RV segment is supported by favorable demographics, as more people reach the age brackets that historically have
accounted for the bulk of retail RV sales. The number of consumers between the ages of 55 and 74 will total 79 million by 2025, 15% higher than in 2015 according to the RVIA. In addition, in recent years the industry has benefited
from growing retail sales to younger consumers with new product offerings targeted to younger, more active families, as they place a higher value on family outdoor recreation than any prior generation. Based on a study from the Pew Research Center,
the Millennial generation, defined as those currently between the ages of 18 and 34, consisted of more than 75 million people in 2015. In general, these consumers are more technologically savvy, but still value active outdoor
experiences shared with family and friends, making them strong potential customers for our industry in the decades to come. Based on reports published by Kampgrounds of America (KOA), campers in this age group have grown from 18% of total campers to
23% of total campers between 2012 and 2015. Younger RV consumers are generally attracted to lower and moderately priced travel trailers, as affordability is a key driver at this stage in their lives.
As the first generation of the internet age, Millennials are generally more comfortable gathering information online, and are therefore generally
more knowledgeable about products and competitive pricing than any prior generation. This generation is camping more as they view camping as an opportunity to spend time with family and friends as well as a way to reduce stress, escape the pressures
of everyday life, be more active and lead a healthier lifestyle. In addition to younger age demographics, there are opportunities to expand sales to a more ethnically diverse customer base. In our efforts to connect with RV consumers of all
generations, during the first quarter of fiscal 2017 we launched a new consumer-facing website designed to inspire consumers to explore the RV lifestyle. The new website includes video and interactive features to help consumers determine the type of
RV which may suit their specific camping needs, while providing video footage that can be utilized by dealers to market our products. We will continue to evaluate additional marketing opportunities to younger and more diverse consumers over the
coming year.
16
Economic or industry-wide factors affecting our RV business include the costs of commodities and labor
used in the manufacture of our products. Material and labor costs are the primary factors determining our cost of products sold, and any future increases in raw material or labor costs would impact our profit margins negatively if we were unable to
raise the selling prices for our products by corresponding amounts. Historically, we have been able to pass along those cost increases to customers.
The recreational vehicle industry has, from time to time, experienced shortages of chassis for various reasons, including component shortages, production delays and work stoppages at the chassis manufacturers.
These shortages have had a negative impact on our sales and earnings in the past. Recently, we have not experienced any significant unusual cost increases or supply constraints from our chassis suppliers.
17
Three Months Ended April 30, 2017 Compared to the Three Months Ended April 30, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
April 30,
2017
|
|
|
|
|
|
Three Months Ended
April 30,
2016
|
|
|
|
|
|
Change
Amount
|
|
|
%
Change
|
|
NET SALES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recreational vehicles
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Towables
|
|
$
|
1,426,192
|
|
|
|
|
|
|
$
|
934,574
|
|
|
|
|
|
|
$
|
491,618
|
|
|
|
52.6
|
|
Motorized
|
|
|
549,883
|
|
|
|
|
|
|
|
307,630
|
|
|
|
|
|
|
|
242,253
|
|
|
|
78.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total recreational vehicles
|
|
|
1,976,075
|
|
|
|
|
|
|
|
1,242,204
|
|
|
|
|
|
|
|
733,871
|
|
|
|
59.1
|
|
Other
|
|
|
70,019
|
|
|
|
|
|
|
|
61,572
|
|
|
|
|
|
|
|
8,447
|
|
|
|
13.7
|
|
Intercompany eliminations
|
|
|
(30,870
|
)
|
|
|
|
|
|
|
(19,722
|
)
|
|
|
|
|
|
|
(11,148
|
)
|
|
|
(56.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,015,224
|
|
|
|
|
|
|
$
|
1,284,054
|
|
|
|
|
|
|
$
|
731,170
|
|
|
|
56.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
# OF UNITS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recreational vehicles
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Towables
|
|
|
58,481
|
|
|
|
|
|
|
|
36,013
|
|
|
|
|
|
|
|
22,468
|
|
|
|
62.4
|
|
Motorized
|
|
|
6,927
|
|
|
|
|
|
|
|
3,935
|
|
|
|
|
|
|
|
2,992
|
|
|
|
76.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
65,408
|
|
|
|
|
|
|
|
39,948
|
|
|
|
|
|
|
|
25,460
|
|
|
|
63.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS PROFIT:
|
|
|
|
|
% of
Segment
Net
Sales
|
|
|
|
|
|
% of
Segment
Net
Sales
|
|
|
Change
Amount
|
|
|
%
Change
|
|
Recreational vehicles
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Towables
|
|
$
|
219,686
|
|
|
|
15.4
|
|
|
$
|
152,534
|
|
|
|
16.3
|
|
|
$
|
67,152
|
|
|
|
44.0
|
|
Motorized
|
|
|
61,081
|
|
|
|
11.1
|
|
|
|
38,751
|
|
|
|
12.6
|
|
|
|
22,330
|
|
|
|
57.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total recreational vehicles
|
|
|
280,767
|
|
|
|
14.2
|
|
|
|
191,285
|
|
|
|
15.4
|
|
|
|
89,482
|
|
|
|
46.8
|
|
Other, net
|
|
|
13,074
|
|
|
|
18.7
|
|
|
|
10,652
|
|
|
|
17.3
|
|
|
|
2,422
|
|
|
|
22.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
293,841
|
|
|
|
14.6
|
|
|
$
|
201,937
|
|
|
|
15.7
|
|
|
$
|
91,904
|
|
|
|
45.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
|
|
|
|
|
|
|
|
|
|
Recreational vehicles
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Towables
|
|
$
|
72,415
|
|
|
|
5.1
|
|
|
$
|
51,737
|
|
|
|
5.5
|
|
|
$
|
20,678
|
|
|
|
40.0
|
|
Motorized
|
|
|
22,796
|
|
|
|
4.1
|
|
|
|
14,635
|
|
|
|
4.8
|
|
|
|
8,161
|
|
|
|
55.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total recreational vehicles
|
|
|
95,211
|
|
|
|
4.8
|
|
|
|
66,372
|
|
|
|
5.3
|
|
|
|
28,839
|
|
|
|
43.5
|
|
Other
|
|
|
2,497
|
|
|
|
3.6
|
|
|
|
2,394
|
|
|
|
3.9
|
|
|
|
103
|
|
|
|
4.3
|
|
Corporate
|
|
|
13,414
|
|
|
|
|
|
|
|
12,067
|
|
|
|
|
|
|
|
1,347
|
|
|
|
11.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
111,122
|
|
|
|
5.5
|
|
|
$
|
80,833
|
|
|
|
6.3
|
|
|
$
|
30,289
|
|
|
|
37.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES:
|
|
|
|
|
|
|
|
|
|
Recreational vehicles
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Towables
|
|
$
|
134,504
|
|
|
|
9.4
|
|
|
$
|
96,893
|
|
|
|
10.4
|
|
|
$
|
37,611
|
|
|
|
38.8
|
|
Motorized
|
|
|
37,356
|
|
|
|
6.8
|
|
|
|
24,115
|
|
|
|
7.8
|
|
|
|
13,241
|
|
|
|
54.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total recreational vehicles
|
|
|
171,860
|
|
|
|
8.7
|
|
|
|
121,008
|
|
|
|
9.7
|
|
|
|
50,852
|
|
|
|
42.0
|
|
Other, net
|
|
|
8,713
|
|
|
|
12.4
|
|
|
|
6,441
|
|
|
|
10.5
|
|
|
|
2,272
|
|
|
|
35.3
|
|
Corporate
|
|
|
(14,342
|
)
|
|
|
|
|
|
|
(11,166
|
)
|
|
|
|
|
|
|
(3,176
|
)
|
|
|
(28.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
166,231
|
|
|
|
8.2
|
|
|
$
|
116,283
|
|
|
|
9.1
|
|
|
$
|
49,948
|
|
|
|
43.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ORDER BACKLOG:
|
|
As of
April 30, 2017
|
|
|
As of
April 30, 2016
|
|
|
Change
Amount
|
|
|
%
Change
|
|
Recreational vehicles
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Towables
|
|
$
|
1,564,609
|
|
|
$
|
727,539
|
|
|
$
|
837,070
|
|
|
|
115.1
|
|
Motorized
|
|
|
795,515
|
|
|
|
329,272
|
|
|
|
466,243
|
|
|
|
141.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,360,124
|
|
|
$
|
1,056,811
|
|
|
$
|
1,303,313
|
|
|
|
123.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
CONSOLIDATED
Consolidated net sales for the three months ended April 30, 2017 increased $731,170 or 56.9%, compared to the three months ended April 30, 2016. The addition of Jayco accounted for $516,537 of the
$731,170 increase and 40.2% of the 56.9% increase in consolidated net sales. Consolidated gross profit for the three months ended April 30, 2017 increased $91,904, or 45.5%, compared to the three months ended April 30, 2016, with Jayco
accounting for $66,058 of the $91,904 increase and 32.7% of the 45.5% increase. Consolidated gross profit was 14.6% of consolidated net sales for the three months ended April 30, 2017 and 15.7% for the three months ended April 30, 2016.
The decrease in gross profit percentage is primarily due to the dilutive impacts of Jaycos gross profit percentage of 12.8% and the market-driven changes in product mix toward generally smaller and lower-priced units, which typically have
lower gross margins.
Selling, general and administrative expenses for the three months ended April 30, 2017 increased $30,289 or
37.5% compared to the three months ended April 30, 2016. Amortization of intangible assets expense for the three months ended April 30, 2017 increased $9,436 compared to the three months ended April 30, 2016, primarily due to
Jaycos total amortization expense of $10,007. Income from continuing operations before income taxes for the three months ended April 30, 2017 was $166,231, as compared to $116,283 for the three months ended April 30, 2016, an
increase of $49,948 or 43.0%.
Additional information concerning the changes in net sales, gross profit, selling, general and
administrative expenses and income before income taxes are addressed in the segment reporting that follows.
Corporate costs included in
selling, general and administrative expenses increased $1,347 to $13,414 for the three months ended April 30, 2017 compared to $12,067 for the three months ended April 30, 2016. The increase is primarily due to an increase in compensation
costs, as incentive compensation increased $895 in correlation with the increase in income from continuing operations before income taxes compared to the prior year, and stock-based compensation increased $854. The stock-based compensation increase
is due to increasing income from continuing operations before income taxes over the past three years, as most stock awards vest ratably over a three-year period. Deferred compensation expense also increased $377, which relates to the equal and
offsetting increase in other income noted below due to the market value change in the related deferred compensation plan assets. In addition, costs related to sales and marketing initiatives increased $755. These increases were partially offset by a
decrease of $580 in costs related to the actuarially determined workers compensation and product liability reserves recorded at Corporate. Legal and professional fees also decreased by $868, primarily due to initial professional fees related
to the Jayco acquisition in the prior-year period.
Corporate interest and other income and expense was $928 of net expense for the
three months ended April 30, 2017 compared to $901 of net income for the three months ended April 30, 2016. This increase in net expense of $1,829 is primarily due to interest expense and fees of $2,389 incurred in the current-year period
related to the revolving credit facility, as there were no such charges in the prior-year period, partially offset by the market value of the Companys deferred compensation plan assets appreciating $1,043 in the current-year period as compared
to appreciating $666 in the prior-year period, an increase in income of $377.
The overall effective income tax rate for the three
months ended April 30, 2017 was 33.1% compared with 31.9% for the three months ended April 30, 2016. The primary reason for the increase in the effective income tax rate is due to the larger amount of uncertain tax benefit settlements and
expirations that occurred in the three months ended April 30, 2016 compared to the three months ended April 30, 2017.
19
Segment Reporting
TOWABLE RECREATIONAL VEHICLES
Analysis of the change in net sales for the three months
ended April 30, 2017 compared to the three months ended April 30, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
April 30, 2017
|
|
|
% of
Segment
Net Sales
|
|
|
Three Months
Ended
April 30, 2016
|
|
|
% of
Segment
Net Sales
|
|
|
Change
Amount
|
|
|
%
Change
|
|
NET SALES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Towables
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Travel Trailers and Other
|
|
$
|
859,572
|
|
|
|
60.3
|
|
|
$
|
520,242
|
|
|
|
55.7
|
|
|
$
|
339,330
|
|
|
|
65.2
|
|
Fifth Wheels
|
|
|
566,620
|
|
|
|
39.7
|
|
|
|
414,332
|
|
|
|
44.3
|
|
|
|
152,288
|
|
|
|
36.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Towables
|
|
$
|
1,426,192
|
|
|
|
100.0
|
|
|
$
|
934,574
|
|
|
|
100.0
|
|
|
$
|
491,618
|
|
|
|
52.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
April 30, 2017
|
|
|
% of
Segment
Shipments
|
|
|
Three Months
Ended
April 30, 2016
|
|
|
% of
Segment
Shipments
|
|
|
Change
Amount
|
|
|
%
Change
|
|
# OF UNITS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Towables
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Travel Trailers and Other
|
|
|
45,439
|
|
|
|
77.7
|
|
|
|
26,504
|
|
|
|
73.6
|
|
|
|
18,935
|
|
|
|
71.4
|
|
Fifth Wheels
|
|
|
13,042
|
|
|
|
22.3
|
|
|
|
9,509
|
|
|
|
26.4
|
|
|
|
3,533
|
|
|
|
37.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Towables
|
|
|
58,481
|
|
|
|
100.0
|
|
|
|
36,013
|
|
|
|
100.0
|
|
|
|
22,468
|
|
|
|
62.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impact of Change in Mix and Price on Net Sales:
|
|
%
Decrease
|
|
Towables
|
|
|
|
|
Travel Trailers and Other
|
|
|
(6.2
|
)
|
Fifth Wheels
|
|
|
(0.4
|
)
|
Total Towables
|
|
|
(9.8
|
)
|
The increase in total towables net sales of 52.6% compared to the prior-year quarter resulted from a 62.4% increase
in unit shipments partially offset by a 9.8% decrease in the impact of the change in the overall net price per unit. The addition of Jayco accounted for 38.8% of the 52.6% increase in total towable net sales and for $362,871 of the $491,618
increase. Jayco also accounted for 46.8% of the 62.4% increase in total towable unit shipments and for 16,850 of the 22,468 unit increase. The 9.8% decrease in the overall towables net price per unit is greater than the percentage decreases within
the travel trailer and fifth wheel product lines due to a higher concentration of more moderately priced travel trailers and other units, as compared to fifth wheels, in the current-year quarter as compared to the prior-year quarter. The overall
industry increase in combined travel trailer and fifth wheel wholesale unit shipments for the three months ended April 30, 2017 was 11.6% compared to the same period last year according to statistics published by RVIA.
The decreases in the overall net price per unit within the travel trailer and other product lines of 6.2% and the fifth wheel product lines of 0.4%
were both primarily due to a change in product mix attributable to the acquisition of Jayco and market-driven changes in product mix toward generally smaller and lower-priced units.
Cost of products sold increased $424,466 to $1,206,506 or 84.6% of towables net sales, for the three months ended April 30, 2017 compared to
$782,040 or 83.7% of towables net sales, for the three months ended April 30, 2016. The change in material, labor,
freight-out
and warranty comprised $394,302 of the $424,466 increase in cost of products
sold. Material, labor,
freight-out
and warranty as a combined percentage of towables net sales increased to 78.9% for the three months ended April 30, 2017 compared to 78.3% for the three months ended
April 30, 2016. This increase in percentage was primarily the result of an increase in the
freight-out
percentage to sales, which is attributable to the acquisition of Jayco. Material and labor cost
percentages were also up slightly, primarily due to changes in product mix and the current competitive RV labor market, respectively. Total manufacturing overhead increased $30,164 with the increase in sales, and increased as a percentage of
towables net sales from 5.4% to 5.7%, primarily due to an increased percentage in self-insured health insurance costs.
20
Towables gross profit increased $67,152 to $219,686, or 15.4% of towables net sales, for the three
months ended April 30, 2017 compared to $152,534, or 16.3% of towables net sales, for the three months ended April 30, 2016. The increase in gross profit is primarily due to the 62.4% increase in unit sales volume noted above, while the
decrease in gross profit percentage is primarily due to the increase in the cost of products sold percentage noted above.
Selling,
general and administrative expenses were $72,415, or 5.1% of towables net sales, for the three months ended April 30, 2017 compared to $51,737, or 5.5% of towables net sales, for the three months ended April 30, 2016. The primary reason
for the $20,678 increase was increased towables net sales and towables income before income taxes, which caused related commissions, bonuses and other compensation to increase by $14,586. These costs, however, decreased as a percentage of towables
net sales by 0.4% compared to the prior-year period, partially attributable to the impact of the Jayco acquisition. Sales-related travel, advertising and promotional costs also increased $2,811 in correlation with the sales increase, and legal,
professional and related settlement costs increased $1,815.
Towables income before income taxes was $134,504 or 9.4% of towables net
sales, for the three months ended April 30, 2017 compared to $96,893, or 10.4% of towables net sales, for the three months ended April 30, 2016. The primary reason for the decrease in percentage was the impact of the increase in the cost
of products sold percentage as noted above. In addition, amortization costs as a percentage of towables net sales increased 0.5% due to the addition of $9,075 in amortization costs as a result of the Jayco acquisition. These increases in cost
percentages were partially offset by the decrease in the selling, general and administrative expense percentage to sales noted above.
MOTORIZED
RECREATIONAL VEHICLES
Analysis of the change in net sales for the three months ended April 30, 2017 compared to the three
months ended April 30, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
April 30,
2017
|
|
|
% of
Segment
Net Sales
|
|
|
Three Months
Ended
April 30,
2016
|
|
|
% of
Segment
Net Sales
|
|
|
Change
Amount
|
|
|
%
Change
|
|
NET SALES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Motorized
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A
|
|
$
|
242,770
|
|
|
|
44.1
|
|
|
$
|
157,589
|
|
|
|
51.2
|
|
|
$
|
85,181
|
|
|
|
54.1
|
|
Class C
|
|
|
282,703
|
|
|
|
51.4
|
|
|
|
129,420
|
|
|
|
42.1
|
|
|
|
153,283
|
|
|
|
118.4
|
|
Class B
|
|
|
24,410
|
|
|
|
4.5
|
|
|
|
20,621
|
|
|
|
6.7
|
|
|
|
3,789
|
|
|
|
18.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Motorized
|
|
$
|
549,883
|
|
|
|
100.0
|
|
|
$
|
307,630
|
|
|
|
100.0
|
|
|
$
|
242,253
|
|
|
|
78.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
April 30, 2017
|
|
|
% of
Segment
Shipments
|
|
|
Three Months
Ended
April 30, 2016
|
|
|
% of
Segment
Shipments
|
|
|
Change
Amount
|
|
|
%
Change
|
|
# OF UNITS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Motorized
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A
|
|
|
2,151
|
|
|
|
31.1
|
|
|
|
1,613
|
|
|
|
41.0
|
|
|
|
538
|
|
|
|
33.4
|
|
Class C
|
|
|
4,584
|
|
|
|
66.2
|
|
|
|
2,154
|
|
|
|
54.7
|
|
|
|
2,430
|
|
|
|
112.8
|
|
Class B
|
|
|
192
|
|
|
|
2.7
|
|
|
|
168
|
|
|
|
4.3
|
|
|
|
24
|
|
|
|
14.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Motorized
|
|
|
6,927
|
|
|
|
100.0
|
|
|
|
3,935
|
|
|
|
100.0
|
|
|
|
2,992
|
|
|
|
76.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impact of Change in Mix and Price on Net Sales:
|
|
%
Increase
|
|
Motorized
|
|
|
|
|
Class A
|
|
|
20.7
|
|
Class C
|
|
|
5.6
|
|
Class B
|
|
|
4.1
|
|
Total Motorized
|
|
|
2.7
|
|
21
The increase in total motorized net sales of 78.7% compared to the prior-year quarter resulted from a
76.0% increase in unit shipments and a 2.7% increase in the impact of the change in the overall net price per unit. The addition of Jayco accounted for 50.0% of the 78.7% increase in total motorized net sales and for $153,666 of the $242,253
increase. Jayco also accounted for 37.3% of the 76.0% increase in total motorized unit shipments and for 1,466 of the 2,992 unit increase. The modest 2.7% increase in the overall motorized net price per unit, in spite of larger percentage increases
within the Class A and Class C product lines, is primarily due to a much higher concentration of the more moderately priced Class C units, as compared to Class A units, in the current-year quarter as compared to the prior-year
quarter. The overall industry increase in wholesale unit shipments of motorhomes for the three months ended April 30, 2017 was 11.8% compared to the same period last year according to statistics published by RVIA.
The increase in the overall net price per unit within the Class A product line of 20.7% was primarily due to a higher concentration of sales
of larger and generally more expensive diesel units compared to the more moderately priced gas units in the current-year quarter compared to the prior-year quarter. This increase was primarily due to the change in product mix attributable to the
acquisition of Jaycos
high-end
Class A diesel products. The increase in the overall net price per unit within the Class C product line of 5.6% is primarily due to a higher concentration of
sales of the generally more expensive
high-end
Class C diesel units in the current period compared to a year ago, also due to the change in product mix attributable to the acquisition of Jayco. The
increase in the overall net price per unit within the Class B product line of 4.1% is primarily due to changes in product mix.
Cost of products sold increased $219,923 to $488,802, or 88.9% of motorized net sales, for the three months ended April 30, 2017 compared to
$268,879 or 87.4% of motorized net sales, for the three months ended April 30, 2016. The change in material, labor,
freight-out
and warranty comprised $209,743 of the $219,923 increase due to increased
sales volume. Material, labor,
freight-out
and warranty as a combined percentage of motorized net sales increased to 84.7% for the three months ended April 30, 2017 as compared to 83.2% for the prior year
period. This increase in percentage was primarily due to increases in the material cost percentage to sales due to changes in product mix, which is primarily attributable to the acquisition of Jayco, and an increase in labor costs associated with
increasing employment levels and the current competitive RV labor market. Total manufacturing overhead increased $10,180 with the volume increase, but remained the same as a percentage of motorized net sales at 4.2% for both periods.
Motorized gross profit increased $22,330 to $61,081, or 11.1% of motorized net sales, for the three months ended April 30, 2017 compared to
$38,751, or 12.6% of motorized net sales, for the three months ended April 30, 2016. The $22,330 increase in gross profit was due primarily to the 76.0% increase in unit sales volume noted above, and the decrease as a percentage of motorized
net sales is due to the increase in the cost of products sold percentage noted above.
Selling, general and administrative expenses were
$22,796, or 4.1% of motorized net sales, for the three months ended April 30, 2017 compared to $14,635, or 4.8% of motorized net sales, for the three months ended April 30, 2016. The primary reason for the $8,161 increase was increased
motorized net sales and motorized income before income taxes, which caused related commissions, bonuses and other compensation to increase by $6,163. These costs, however, decreased as a percentage of motorized net sales by 0.6% compared to the
prior-year period, partially attributable to the impact of the Jayco acquisition. Sales related travel, advertising and promotional costs also increased $1,188 in correlation with the sales increase.
Motorized income before income taxes was $37,356, or 6.8% of motorized net sales, for the three months ended April 30, 2017 compared to
$24,115, or 7.8% of motorized net sales, for the three months ended April 30, 2016. The primary reasons for this decrease in percentage were the impact of the increase in the cost of products sold percentage noted above and an increase in
amortization costs as a percentage of motorized net sales of 0.2% due to the addition of $932 in amortization costs as a result of the Jayco acquisition, partially offset by the decrease in the selling, general and administrative expense percentage
to sales as noted above.
22
Nine Months Ended April 30, 2017 Compared to the Nine Months Ended April 30, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
April 30,
2017
|
|
|
|
|
|
Nine Months Ended
April 30,
2016
|
|
|
|
|
|
Change
Amount
|
|
|
%
Change
|
|
NET SALES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recreational vehicles
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Towables
|
|
$
|
3,719,314
|
|
|
|
|
|
|
$
|
2,377,571
|
|
|
|
|
|
|
$
|
1,341,743
|
|
|
|
56.4
|
|
Motorized
|
|
|
1,486,309
|
|
|
|
|
|
|
|
801,596
|
|
|
|
|
|
|
|
684,713
|
|
|
|
85.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total recreational vehicles
|
|
|
5,205,623
|
|
|
|
|
|
|
|
3,179,167
|
|
|
|
|
|
|
|
2,026,456
|
|
|
|
63.7
|
|
Other
|
|
|
182,906
|
|
|
|
|
|
|
|
159,965
|
|
|
|
|
|
|
|
22,941
|
|
|
|
14.3
|
|
Intercompany eliminations
|
|
|
(76,249
|
)
|
|
|
|
|
|
|
(49,656
|
)
|
|
|
|
|
|
|
(26,593
|
)
|
|
|
(53.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
5,312,280
|
|
|
|
|
|
|
$
|
3,289,476
|
|
|
|
|
|
|
$
|
2,022,804
|
|
|
|
61.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
# OF UNITS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recreational vehicles
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Towables
|
|
|
155,409
|
|
|
|
|
|
|
|
91,490
|
|
|
|
|
|
|
|
63,919
|
|
|
|
69.9
|
|
Motorized
|
|
|
18,177
|
|
|
|
|
|
|
|
10,018
|
|
|
|
|
|
|
|
8,159
|
|
|
|
81.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
173,586
|
|
|
|
|
|
|
|
101,508
|
|
|
|
|
|
|
|
72,078
|
|
|
|
71.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS PROFIT:
|
|
|
|
|
% of
Segment
Net
Sales
|
|
|
|
|
|
% of
Segment
Net
Sales
|
|
|
Change
Amount
|
|
|
%
Change
|
|
Recreational vehicles
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Towables
|
|
$
|
546,431
|
|
|
|
14.7
|
|
|
$
|
371,914
|
|
|
|
15.6
|
|
|
$
|
174,517
|
|
|
|
46.9
|
|
Motorized
|
|
|
162,806
|
|
|
|
11.0
|
|
|
|
107,463
|
|
|
|
13.4
|
|
|
|
55,343
|
|
|
|
51.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total recreational vehicles
|
|
|
709,237
|
|
|
|
13.6
|
|
|
|
479,377
|
|
|
|
15.1
|
|
|
|
229,860
|
|
|
|
47.9
|
|
Other, net
|
|
|
33,058
|
|
|
|
18.1
|
|
|
|
23,598
|
|
|
|
14.8
|
|
|
|
9,460
|
|
|
|
40.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
742,295
|
|
|
|
14.0
|
|
|
$
|
502,975
|
|
|
|
15.3
|
|
|
$
|
239,320
|
|
|
|
47.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
|
|
|
|
|
|
|
|
|
|
Recreational vehicles
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Towables
|
|
$
|
201,158
|
|
|
|
5.4
|
|
|
$
|
137,435
|
|
|
|
5.8
|
|
|
$
|
63,723
|
|
|
|
46.4
|
|
Motorized
|
|
|
64,978
|
|
|
|
4.4
|
|
|
|
41,168
|
|
|
|
5.1
|
|
|
|
23,810
|
|
|
|
57.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total recreational vehicles
|
|
|
266,136
|
|
|
|
5.1
|
|
|
|
178,603
|
|
|
|
5.6
|
|
|
|
87,533
|
|
|
|
49.0
|
|
Other
|
|
|
7,089
|
|
|
|
3.9
|
|
|
|
6,022
|
|
|
|
3.8
|
|
|
|
1,067
|
|
|
|
17.7
|
|
Corporate
|
|
|
37,176
|
|
|
|
|
|
|
|
32,028
|
|
|
|
|
|
|
|
5,148
|
|
|
|
16.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
310,401
|
|
|
|
5.8
|
|
|
$
|
216,653
|
|
|
|
6.6
|
|
|
$
|
93,748
|
|
|
|
43.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES:
|
|
|
|
|
|
|
|
|
|
Recreational vehicles
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Towables
|
|
$
|
306,677
|
|
|
|
8.2
|
|
|
$
|
213,186
|
|
|
|
9.0
|
|
|
$
|
93,491
|
|
|
|
43.9
|
|
Motorized
|
|
|
94,767
|
|
|
|
6.4
|
|
|
|
66,287
|
|
|
|
8.3
|
|
|
|
28,480
|
|
|
|
43.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total recreational vehicles
|
|
|
401,444
|
|
|
|
7.7
|
|
|
|
279,473
|
|
|
|
8.8
|
|
|
|
121,971
|
|
|
|
43.6
|
|
Other, net
|
|
|
20,787
|
|
|
|
11.4
|
|
|
|
12,107
|
|
|
|
7.6
|
|
|
|
8,680
|
|
|
|
71.7
|
|
Corporate
|
|
|
(41,835
|
)
|
|
|
|
|
|
|
(31,718
|
)
|
|
|
|
|
|
|
(10,117
|
)
|
|
|
(31.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
380,396
|
|
|
|
7.2
|
|
|
$
|
259,862
|
|
|
|
7.9
|
|
|
$
|
120,534
|
|
|
|
46.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23
CONSOLIDATED
Consolidated net sales for the nine months ended April 30, 2017 increased $2,022,804 or 61.5%, compared to the nine months ended April 30, 2016. The addition of Jayco accounted for $1,414,956 of the
$2,022,804 increase and 43.0% of the 61.5% increase in consolidated net sales. Consolidated gross profit for the nine months ended April 30, 2017 increased $239,320, or 47.6%, compared to the nine months ended April 30, 2016, with Jayco
accounting for $148,837 of the $239,320 increase and 29.6% of the 47.6% increase. Consolidated gross profit was 14.0% of consolidated net sales for the nine months ended April 30, 2017 and 15.3% for the nine months ended April 30, 2016.
The decrease in gross profit percentage is primarily due to the dilutive impacts of Jaycos gross profit percentage of 10.5% and the market-driven changes in product mix toward generally smaller and lower-priced units, which typically have
lower gross margins.
Selling, general and administrative expenses for the nine months ended April 30, 2017 increased $93,748 or
43.3% compared to the nine months ended April 30, 2016. Amortization of intangible assets expense for the nine months ended April 30, 2017 increased $31,048 compared to the nine months ended April 30, 2016, primarily due to
Jaycos total amortization expense of $32,899. Income from continuing operations before income taxes for the nine months ended April 30, 2017 was $380,396, as compared to $259,862 for the nine months ended April 30, 2016, an increase
of $120,534 or 46.4%.
Additional information concerning the changes in net sales, gross profit, selling, general and administrative
expenses and income before income taxes are addressed in the segment reporting that follows.
Corporate costs included in selling,
general and administrative expenses increased $5,148 to $37,176 for the nine months ended April 30, 2017 compared to $32,028 for the nine months ended April 30, 2016. The increase is primarily due to an increase in compensation costs, as
incentive compensation increased $2,568 in correlation with the increase in income from continuing operations before income taxes compared to the prior year, and stock-based compensation increased $2,067. The stock-based compensation increase is due
to increasing income from continuing operations before income taxes over the past three years, as most stock awards vest ratably over a three-year period. Deferred compensation expense also increased $1,952, which relates to the equal and offsetting
increase in other income noted below due to the market value change in the related deferred compensation plan assets. Costs related to sales and marketing initiatives also increased $1,049. In addition, costs related to our vehicle repurchase
commitments increased $600, primarily due to increased dealer inventory levels. These increases were partially offset by a decrease of $2,796 in legal and professional fees, primarily due to
non-recurring
fees
incurred in the prior-year period related to the development of long-term strategic growth initiatives as well as initial professional fees related to the acquisition of Jayco. There was also a decrease of $1,075 in costs related to the actuarially
determined workers compensation and product liability reserves recorded at Corporate.
Corporate interest and other income and
expense was $4,659 of net expense for the nine months ended April 30, 2017 compared to $310 of net income for the nine months ended April 30, 2016. This increase in net expense of $4,969 is primarily due to interest expense and fees of
$7,112 incurred in the current-year period related to the revolving credit facility, as there were no such charges in the prior-year period, partially offset by the market value of the Companys deferred compensation plan assets appreciating
$1,828 in the current-year period as compared to depreciating $124 in the prior-year period, an increase in income of $1,952.
The
overall effective income tax rate for the nine months ended April 30, 2017 was 33.0% compared with 32.6% for the nine months ended April 30, 2016. The effective income tax rate for the fiscal 2017 nine month period includes a benefit of
$1,843 related to the adoption of ASU
2016-09
as discussed in Note 1 to the Condensed Consolidated Financial Statements. The effective income tax rate for the fiscal 2016 nine month period was favorably
impacted by the retroactive reinstatement of the federal research and development credit and other credits that were enacted on December 18, 2015. The effective income tax rates for the fiscal 2017 and fiscal 2016 periods were both favorably
impacted by various uncertain tax benefit settlements and expirations.
24
Segment Reporting
TOWABLE RECREATIONAL VEHICLES
Analysis of the change in net sales for the nine months
ended April 30, 2017 compared to the nine months ended April 30, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine
Months
Ended
April 30, 2017
|
|
|
% of
Segment
Net Sales
|
|
|
Nine
Months
Ended
April 30, 2016
|
|
|
% of
Segment
Net Sales
|
|
|
Change
Amount
|
|
|
%
Change
|
|
NET SALES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Towables
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Travel Trailers and Other
|
|
$
|
2,236,445
|
|
|
|
60.1
|
|
|
$
|
1,315,750
|
|
|
|
55.3
|
|
|
$
|
920,695
|
|
|
|
70.0
|
|
Fifth Wheels
|
|
|
1,482,869
|
|
|
|
39.9
|
|
|
|
1,061,821
|
|
|
|
44.7
|
|
|
|
421,048
|
|
|
|
39.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Towables
|
|
$
|
3,719,314
|
|
|
|
100.0
|
|
|
$
|
2,377,571
|
|
|
|
100.0
|
|
|
$
|
1,341,743
|
|
|
|
56.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months
Ended
April 30, 2017
|
|
|
% of
Segment
Shipments
|
|
|
Nine Months
Ended
April 30, 2016
|
|
|
% of
Segment
Shipments
|
|
|
Change
Amount
|
|
|
%
Change
|
|
# OF UNITS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Towables
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Travel Trailers and Other
|
|
|
120,813
|
|
|
|
77.7
|
|
|
|
67,157
|
|
|
|
73.4
|
|
|
|
53,656
|
|
|
|
79.9
|
|
Fifth Wheels
|
|
|
34,596
|
|
|
|
22.3
|
|
|
|
24,333
|
|
|
|
26.6
|
|
|
|
10,263
|
|
|
|
42.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Towables
|
|
|
155,409
|
|
|
|
100.0
|
|
|
|
91,490
|
|
|
|
100.0
|
|
|
|
63,919
|
|
|
|
69.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impact of Change in Mix and Price on Net Sales:
|
|
%
Decrease
|
|
Towables
|
|
|
|
|
Travel Trailers and Other
|
|
|
(9.9
|
)
|
Fifth Wheels
|
|
|
(2.5
|
)
|
Total Towables
|
|
|
(13.5
|
)
|
The increase in total towables net sales of 56.4% compared to the prior-year period resulted from a 69.9% increase
in unit shipments partially offset by a 13.5% decrease in the impact of the change in the overall net price per unit. The addition of Jayco accounted for 41.3% of the 56.4% increase in total towable net sales and for $981,273 of the $1,341,743
increase. Jayco also accounted for 51.1% of the 69.9% increase in total towable unit shipments and for 46,774 of the 63,919 unit increase. The 13.5% decrease in the overall towables net price per unit is greater than the percentage decreases within
the travel trailer and fifth wheel product lines due to a higher concentration of more moderately priced travel trailers and other units, as compared to fifth wheels, in the current-year period as compared to the prior-year period. The overall
industry increase in combined travel trailer and fifth wheel wholesale unit shipments for the nine months ended April 30, 2017 was 16.8% compared to the same period last year according to statistics published by RVIA.
The decreases in the overall net price per unit within the travel trailer and other product lines of 9.9% and the fifth wheel product lines of 2.5%
were both primarily due to a change in product mix attributable to the acquisition of Jayco and market-driven changes in product mix toward generally smaller and lower-priced units.
Cost of products sold increased $1,167,226 to $3,172,883, or 85.3% of towables net sales, for the nine months ended April 30, 2017 compared to
$2,005,657, or 84.4% of towables net sales, for the nine months ended April 30, 2016. The change in material, labor,
freight-out
and warranty comprised $1,086,645 of the $1,167,226 increase in cost of
products sold. Material, labor,
freight-out
and warranty as a combined percentage of towables net sales increased to 79.4% for the nine months ended April 30, 2017 compared to 78.5% for the nine months
ended April 30, 2016. This increase in percentage was primarily the result of increases in both the material and
freight-out
percentages to sales, which are primarily attributable to the acquisition of
Jayco. Total manufacturing overhead increased $80,581 with the increase in sales, but remained the same as a percentage of towables net sales at 5.9% for both periods.
Towables gross profit increased $174,517 to $546,431, or 14.7% of towables net sales, for the nine months ended April 30, 2017 compared to $371,914, or 15.6% of towables net sales, for the nine months ended
April 30, 2016. The increase in gross profit is primarily due to the 69.9% increase in unit sales volume noted above, while the decrease in gross profit percentage is primarily due to the increase in the cost of products sold percentage noted
above.
25
Selling, general and administrative expenses were $201,158, or 5.4% of towables net sales, for the
nine months ended April 30, 2017 compared to $137,435, or 5.8% of towables net sales, for the nine months ended April 30, 2016. The primary reason for the $63,723 increase was increased towables net sales and towables income before income
taxes, which caused related commissions, bonuses and other compensation to increase by $44,055. These costs, however, decreased as a percentage of towables net sales by 0.3% compared to the prior-year period, primarily attributable to the impact of
the Jayco acquisition. Sales-related travel, advertising and promotional costs also increased $9,712 in correlation with the sales increase and legal, professional and related settlement costs also increased $3,784.
Towables income before income taxes was $306,677, or 8.2% of towables net sales, for the nine months ended April 30, 2017 compared to
$213,186, or 9.0% of towables net sales, for the nine months ended April 30, 2016. The primary reason for the decrease in percentage was the impact of the increase in the cost of products sold percentage as noted above. In addition,
amortization costs as a percentage of towables net sales also increased 0.6% due to the addition of $29,836 in amortization costs as a result of the Jayco acquisition. These increases in cost percentages were partially offset by the
one-time
goodwill impairment charge of $9,113 included in the results for the nine months ended April 30, 2016 as discussed in Note 8 to the Condensed Consolidated Financial Statements, and the decrease in the
selling, general and administrative expense percentage noted above.
MOTORIZED RECREATIONAL VEHICLES
Analysis of the change in net sales for the nine months ended April 30, 2017 compared to the nine months ended April 30, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine
Months
Ended
April 30, 2017
|
|
|
% of
Segment
Net Sales
|
|
|
Nine Months
Ended
April 30,
2016
|
|
|
% of
Segment
Net Sales
|
|
|
Change
Amount
|
|
|
%
Change
|
|
NET SALES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Motorized
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A
|
|
$
|
706,702
|
|
|
|
47.5
|
|
|
$
|
441,684
|
|
|
|
55.1
|
|
|
$
|
265,018
|
|
|
|
60.0
|
|
Class C
|
|
|
715,795
|
|
|
|
48.2
|
|
|
|
294,104
|
|
|
|
36.7
|
|
|
|
421,691
|
|
|
|
143.4
|
|
Class B
|
|
|
63,812
|
|
|
|
4.3
|
|
|
|
65,808
|
|
|
|
8.2
|
|
|
|
(1,996
|
)
|
|
|
(3.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Motorized
|
|
$
|
1,486,309
|
|
|
|
100.0
|
|
|
$
|
801,596
|
|
|
|
100.0
|
|
|
$
|
684,713
|
|
|
|
85.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months
Ended
April 30, 2017
|
|
|
% of
Segment
Shipments
|
|
|
Nine Months
Ended
April 30,
2016
|
|
|
% of
Segment
Shipments
|
|
|
Change
Amount
|
|
|
%
Change
|
|
# OF UNITS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Motorized
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A
|
|
|
6,399
|
|
|
|
35.2
|
|
|
|
4,626
|
|
|
|
46.2
|
|
|
|
1,773
|
|
|
|
38.3
|
|
Class C
|
|
|
11,274
|
|
|
|
62.0
|
|
|
|
4,852
|
|
|
|
48.4
|
|
|
|
6,422
|
|
|
|
132.4
|
|
Class B
|
|
|
504
|
|
|
|
2.8
|
|
|
|
540
|
|
|
|
5.4
|
|
|
|
(36
|
)
|
|
|
(6.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Motorized
|
|
|
18,177
|
|
|
|
100.0
|
|
|
|
10,018
|
|
|
|
100.0
|
|
|
|
8,159
|
|
|
|
81.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impact of Change in Mix and Price on Net Sales:
|
|
%
Increase
|
|
Motorized
|
|
|
|
|
Class A
|
|
|
21.7
|
|
Class C
|
|
|
11.0
|
|
Class B
|
|
|
3.7
|
|
Total Motorized
|
|
|
4.0
|
|
The increase in total motorized net sales of 85.4% compared to the prior-year period resulted from an 81.4%
increase in unit shipments and a 4.0% increase in the impact of the change in the overall net price per unit. The addition of Jayco accounted for 54.1% of the 85.4% increase in total motorized net sales and for $433,683 of the $684,713 increase.
Jayco accounted for 42.4% of the 81.4% increase in total motorized unit shipments and for 4,243 of the 8,159 unit increase. The 4.0% increase in the overall motorized net price per unit, in spite of much larger percentage increases within the
Class A and Class C product lines, is primarily due to a significantly higher concentration of the more moderately priced Class C units, as compared to Class A units, in the current-year period as compared to the prior-year
period. The overall industry increase in wholesale unit shipments of motorhomes for the nine months ended April 30, 2017 was 14.0% compared to the same period last year according to statistics published by RVIA.
26
The increase in the overall net price per unit within the Class A product line of 21.7% was
primarily due to a higher concentration of sales of larger and generally more expensive diesel units compared to the more moderately priced gas units in the current-year period compared to the prior-year period. This increase was primarily due to
the change in product mix attributable to the acquisition of Jaycos
high-end
Class A diesel products. The increase in the overall net price per unit within the Class C product line of 11.0% is
primarily due to a higher concentration of sales of the generally more expensive
high-end
Class C diesel units in the current period compared to a year ago, also due to the change in product mix
attributable to the acquisition of Jayco. The increase in the overall net price per unit within the Class B product line of 3.7% is primarily due to changes in product mix.
Cost of products sold increased $629,370 to $1,323,503, or 89.0% of motorized net sales, for the nine months ended April 30, 2017 compared to
$694,133, or 86.6% of motorized net sales, for the nine months ended April 30, 2016. The change in material, labor,
freight-out
and warranty comprised $600,688 of the $629,370 increase due to increased
sales volume. Material, labor,
freight-out
and warranty as a combined percentage of motorized net sales increased to 84.8% for the nine months ended April 30, 2017 as compared to 82.3% for the prior year
period. This increase in percentage was primarily due to an increase in the material cost percentage to sales due to changes in product mix, which is primarily attributable to the acquisition of Jayco, and an increase in labor costs associated with
increasing employment levels and the current competitive RV labor market. The warranty cost percentage also increased, partially due to the acquisition of Jayco. Total manufacturing overhead increased $28,682 with the volume increase, but decreased
slightly as a percentage of motorized net sales from 4.3% to 4.2%.
Motorized gross profit increased $55,343 to $162,806, or 11.0% of
motorized net sales, for the nine months ended April 30, 2017 compared to $107,463, or 13.4% of motorized net sales, for the nine months ended April 30, 2016. The $55,343 increase in gross profit was due primarily to the 81.4% increase in
unit sales volume noted above, and the decrease as a percentage of motorized net sales is due to the increase in the cost of products sold percentage noted above.
Selling, general and administrative expenses were $64,978, or 4.4% of motorized net sales, for the nine months ended April 30, 2017 compared to $41,168, or 5.1% of motorized net sales, for the nine months
ended April 30, 2016. The primary reason for the $23,810 increase was increased motorized net sales and motorized income before income taxes, which caused related commissions, bonuses and other compensation to increase by $17,284. These costs,
however, decreased as a percentage of motorized net sales by 0.7% compared to the prior-year period, primarily attributable to the impact of the Jayco acquisition. Sales related travel, advertising and promotional costs also increased $4,099 in
correlation with the sales increase.
Motorized income before income taxes was $94,767, or 6.4% of motorized net sales, for the nine
months ended April 30, 2017 compared to $66,287, or 8.3% of motorized net sales, for the nine months ended April 30, 2016. The primary reasons for this decrease in percentage were the impact of the increase in the cost of products sold
percentage noted above and an increase in amortization costs as a percentage of motorized net sales of 0.2% due to the addition of $3,063 in amortization costs as a result of the Jayco acquisition, partially offset by the decrease in the selling,
general and administrative expense percentage to sales noted above.
Financial Condition and Liquidity
As of April 30, 2017, we had $189,411 in cash and cash equivalents compared to $209,902 on July 31, 2016. The components of this $20,491
decrease in cash and cash equivalents are described in more detail below, but the decrease is primarily attributable to cash provided by operations of $182,834 being more than offset by $79,456 paid for capital expenditures, $65,000 in principal
payments on long-term debt and $52,057 paid for dividends.
Working capital at April 30, 2017 was $492,918 compared to $365,206 at
July 31, 2016, with the increase primarily attributable to increases in accounts receivable and inventory in correlation with the increases in sales, backlog and production lines. Capital expenditures of $79,456 for the nine months ended
April 30, 2017 were made primarily for land and production building additions and improvements, as well as replacing machinery and equipment used in the ordinary course of business.
We strive to maintain adequate cash balances to ensure we have sufficient resources to respond to opportunities and changing business conditions. We
believe our
on-hand
cash and cash equivalents, and funds generated from continuing operations, along with funds available under the revolving asset-based credit facility, will be sufficient to fund expected
future operational requirements. We have historically relied on internally generated cash flows from operations to finance substantially all our growth, however, we obtained a revolving asset-based credit facility to partially fund the fiscal 2016
acquisition of Jayco as discussed in Notes 2 and 11 to the Condensed Consolidated Financial Statements.
Our main priorities for the use
of current and future available cash generated from operations include supporting and growing our core businesses, both organically and through acquisitions, maintaining and growing our regular dividends over time, and reducing
indebtedness. Strategic share repurchases or special dividends as determined by the Companys Board will also continue to be considered.
27
In regard to supporting and growing our business, we anticipate capital expenditures during the
remainder of fiscal 2017 of approximately $50,000, primarily for the continued expansion of our facilities and replacing and upgrading machinery, equipment and other assets to be used in the ordinary course of business. In regard to reducing
indebtedness, in May 2017 we made additional debt payments of $50,000, which brings the remaining indebtedness to $245,000 as of May 31, 2017. We may also consider additional strategic growth acquisitions that complement or expand our ongoing
operations.
The Companys Board currently intends to continue regular quarterly cash dividend payments in the future. As is
customary under asset-based lines of credit, certain actions, including our ability to pay dividends, are subject to the satisfaction of certain payment conditions prior to payment. The conditions for the payments of dividends include a minimum
level of adjusted excess cash availability and a fixed charge coverage ratio test, both as defined in the credit agreement. The declaration of future dividends and the establishment of the per share amounts, record dates and payment dates for any
such future dividends are subject to the determination of the Board, and will be dependent upon future earnings, cash flows and other factors.
Future purchases of the Companys common stock or special cash dividends may occur based upon market and business conditions and excess cash availability, subject to potential customary limits and restrictions
pursuant to the credit facility, applicable legal limitations and determination by the Board.
Operating Activities
Net cash provided by operating activities for the nine months ended April 30, 2017 was $182,834 as compared to net cash provided by operating
activities of $144,908 for the nine months ended April 30, 2016.
For the nine months ended April 30, 2017, net income
adjusted for
non-cash
items (primarily depreciation, amortization of intangibles, deferred income tax provision and stock-based compensation) provided $327,816 of operating cash. The changes in working capital
used $144,982 of operating cash during that period, primarily due to larger than usual seasonal increases in accounts receivable and inventory in correlation with the increases in sales, backlog and production lines, partially offset by an increase
in accounts payable.
For the nine months ended April 30, 2016, net income adjusted for
non-cash
items (primarily depreciation, amortization of intangibles, impairment charges, deferred income tax provision and stock-based compensation) provided $223,314 of operating cash. The changes in working
capital used $78,406 of operating cash during that period, primarily due to a seasonal increase in accounts receivable and inventory in correlation with the increase in current sales, production levels and backlog, partially offset by an increase in
accounts payable.
Investing Activities
Net cash used in investing activities for the nine months ended April 30, 2017 was $81,446, primarily due to capital expenditures of $79,456 and a final purchase price adjustment payment of $5,039 related to
the fiscal 2016 acquisition of Jayco, partially offset by proceeds received on the dispositions of property, plant and equipment of $4,630.
Net cash used in investing activities for the nine months ended April 30, 2016 was $31,421, primarily due to capital expenditures of $39,411, partially offset by proceeds received on notes receivable of
$8,367.
Financing Activities
Net cash used in financing activities for the nine months ended April 30, 2017 was $121,879, primarily for principal payments on the revolving credit facility totaling $65,000 and regular quarterly cash
dividend payments of $0.33 per share for each of the first three quarters of fiscal 2017 totaling $52,057.
Net cash used in financing
activities for the nine months ended April 30, 2016 was $49,668, primarily for the regular quarterly cash dividend payments of $0.30 per share for each of the first three quarters of fiscal 2016 totaling $47,227.
The Company increased its previous regular quarterly dividend of $0.30 per share to $0.33 per share in October 2016. In October 2015, the Company
increased its previous regular quarterly dividend of $0.27 per share to $0.30 per share.
Accounting Pronouncements
Reference is made to Note 1 of our Condensed Consolidated Financial Statements contained in this report for a summary of recently issued accounting
pronouncements, which summary is hereby incorporated by reference.
28